On this page
Incoterms are standardized trade terms that define who pays for freight, insurance, and customs. Used globally since 1936, they're updated every 10 years. The current version is Incoterms 2020 (ICC).
The 11 Incoterms (grouped by mode of transport)
Sea freight (most common for SA imports)
| Term | What it means | Who pays freight? | Who pays duty & VAT? |
|---|---|---|---|
| FOB Shanghai | Free On Board — you take ownership once goods are on the ship | You (buyer) | You (buyer) |
| CIF Durban | Cost, Insurance & Freight — supplier pays to your port | Supplier | You (buyer) |
| DDP Johannesburg | Delivered Duty Paid — supplier delivers to your door with everything paid | Supplier | Supplier |
Other Incoterms (less common for SA)
FOB vs CIF vs DDP: Cost Comparison
Same R100k product from Shanghai. Who pays what?
| Item | FOB Shanghai | CIF Durban | DDP JNB |
|---|---|---|---|
| Product cost | 100,000 (you) | Included | Included |
| Freight | R35,000 (you) | Included | Included |
| Insurance | R300 (you) | Included | Included |
| CIF value for duty | 135,300 | 135,300 | 135,300 |
| Customs duty (45%) | R60,885 (you) | R60,885 (you) | R60,885 (supplier) |
| VAT (15% on ATV: CIF + 10% + duty) | R31,457 (you) | R31,457 (you) | R31,457 (supplier) |
| Port & clearing | R5,000 (you) | R5,000 (you) | R5,000 (supplier) |
| Your total cost | R232,642 | R135,300 | 0 (supplier pays all) |
Key insight: FOB is cheapest upfront (supplier charges less) but you pay more in total. DDP is most expensive upfront but all-in. CIF is the sweet spot for most SA importers: you control logistics but supplier absorbs freight risk.
Which Incoterm should you choose?
Choose if: You have experience importing, trust your supplier, want lowest product price, or have a freight forwarder who negotiates rates.
Risk: Higher overall cost, you manage all logistics, shipping delays are your problem.
Cash flow: Pay product cost upfront, plus freight, insurance, duty later.
Choose if: You're a first-time or regular importer. Best balance of cost and simplicity. Supplier absorbs shipping risk and negotiates freight. You handle customs.
Advantage: Clear landed cost, supplier responsible for goods arriving safely, you just clear customs at port.
Cash flow: Pay product + freight upfront, then duty when goods arrive.
Choose if: You're a retailer or small importer who wants zero logistics hassle. Supplier delivers to your address with all duties paid.
Downside: Most expensive for you (supplier adds 10–15% markup to cover risk), and you have less control over shipping/clearance quality.
Rare in China: Most Chinese suppliers don't offer DDP (too much risk). More common from EU or Indian suppliers.
Common mistakes with Incoterms
Supplier quotes FOB R100k. You don't ask about freight. Freight comes in at R45k (not R35k you budgeted). Over-budget by R10k.
Supplier quotes CIF Durban. You think all costs are covered. SARS charges you R60k duty on arrival (not included in CIF). Caught off-guard.
You pay R150k upfront for DDP goods. Supplier ships garbage or the wrong goods. You have no recourse.
Pro tip: Always specify the exact Incoterm and destination
Not just "CIF" but "CIF Durban" (or Cape Town, Port Elizabeth). Not just "FOB" but "FOB Shanghai port" (or supplier's factory). The more specific, the fewer disputes.
Related guides
- How to import from China — CIF is recommended for first orders
- Duty & VAT Calculator — always calculate your all-in cost before committing to an Incoterm
Frequently asked questions
What are Incoterms?
Standardised trade terms published by the ICC that define who pays for freight, insurance and customs, and where risk passes from seller to buyer. They have been used globally since 1936 and are updated every ten years — the current version is Incoterms 2020.
What is the difference between FOB, CIF and DDP?
FOB: you take ownership once goods are on the ship and you pay freight, insurance, duty and VAT. CIF: the supplier pays freight and insurance to your port; you still pay duty and VAT. DDP: the supplier delivers to your door with everything paid — the most expensive option, with a 10–15% markup, and rare from Chinese suppliers.
Which Incoterm should a first-time South African importer choose?
CIF is the sweet spot for most first-time and regular importers: a clear landed price, the supplier absorbs shipping risk and negotiates the freight, and you handle only customs. FOB suits experienced importers with a forwarder relationship who want the lowest product price and control of logistics.
Does CIF include South African customs duty?
No — a common and costly assumption. CIF covers cost, insurance and freight to the port only; SARS duty and import VAT on arrival are still yours to pay. Always specify the exact term and destination too — "CIF Durban", not just "CIF" — to avoid disputes.